NEW YORK (Reuters) – U.S. shares were mixed late on Thursday as bargain hunters emerged in late trading after investors dumped stocks on fears of sluggish growth and bought safe-haven assets such as government debt and the Swiss franc.
Supply chain woes continued to fuel inflation and growth concerns as Cisco Systems Inc warned of persistent component shortages, knocking its shares down 13.4%.
Data showed factory output in the U.S. Mid-Atlantic region decelerated far more than expected in May with the business outlook for the six months ahead the weakest in more than 13 years, a regional Federal Reserve bank survey said.
Toward the close, some megacap growth stocks that have badly underperformed this year made gains. The Dow Jones Industrial Average fell 0.2%, the S&P 500 gained 0.07% and the Nasdaq Composite added 0.56%.
Big slides for Walmart on Tuesday and Target on Wednesday had investors demoralized and wondering about higher costs across the supply chain, said Michael James, managing director of equity trading at Wedbush Securities.
“You got a pretty severe shock to the system for portfolio managers with the combination of those two,” James said. “That type of damage is hard to repair, piled on top of the extremely challenging year that technology investors have had,” he said.
“On the other hand, you’ll get trading optimists who view things have gotten extremely oversold and with the Nasdaq down 27% coming into today, you’re due for some kind of a bounce.”
Traders are looking for a catalyst that will turn the market around as a near-term bottom approaches, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC.
But, ‘there’s probably still enough fear among investors to see a few more downdrafts,” Meckler said.
Cash hoarding has reached the highest level since September 2001, indicating strong bearish sentiment, according to Louise Dudley, a portfolio manager at Federated Hermes Ltd.
Goldman Sachs estimates a 35% probability of a U.S. recession in the next two years, while Morgan Stanley’s sees a 25% chance of one in the next 12 months.
U.S. spot power and natural gas prices soared to their highest in over a year in some U.S. regions as Americans cranked up air conditioners during a spring heatwave.
MSCI’s gauge of stocks across the globe shed 0.18% and the pan-European STOXX 600 index closed down a preliminary 1.37%.
Asia-Pacific shares ex-Japan snapped four days of gains to wilt 1.8%, dragged down by a 1.65% loss for Australia’s resource-heavy index, a 2.5% drop in Hong Kong. Tokyo’s Nikkei shed 1.9%.
Germany’s 10-year bond yield fell below 1% and U.S. Treasury yields fell as more soft U.S. economic data stirred worries the Federal Reserve’s aggressive monetary tightening could hurt the global economy.
The yield on 10-year Treasury notes fell 3.8 basis points to 2.846%, after hitting a three-week low of 2.772%.
The dollar fell across the board, pulling back further from a two-decade high, as most other major currencies drew buyers.
The dollar index fell 1.021%, with the euro up 1.21% to $1.0593. The Japanese yen strengthened 0.38% to 127.71 per dollar.
Graphic: Worst start to a year for world stocks –
Central banks have been walking a tightrope, trying to regain control of decades-high inflation without causing painful recessions.
“We will have to discuss what we can do together in our respective areas of responsibility to avoid stagflation scenarios,” German finance minister Christian Lindner said as he arrived for a two-day meeting of top central bankers near Bonn.
Oil prices rallied late as Chinese officials planned to ease restrictions in Shanghai, which could further tighten global energy supply, and as the dollar retreated.
U.S. crude futures rose $2.62 to settle at $112.21 a barrel. Brent settled up $2.93 at $112.04 a barrel.
U.S. gold futures settled up 1.4% at $1,841.20 an ounce, as a weaker dollar and Treasury yields burnished bullion’s safe-haven appeal.
Graphic: Inflation surge driven by food and energy prices –
Reporting by Herbert Lash, additional reporting by Marc Jones in London, Francesco Canepa in Koenigswinter, Germany, Stella Qiu in Beijing and Alun John in Hong Kong; Editing by Kirsten Donovan, Bernadette Baum and David Gregorio
